C = 195 +0.15(Y - T) \= 215 G= 80 NX = -40 T= 120 Y* - 475 What policy could the Federal Reserve implement to eliminate the output gap? Increase G by 28 Increase the reserve deposit ratio Increase T by 188 Buy Bonds

C = 195 +0.15(Y - T) \= 215 G= 80 NX = -40 T= 120 Y* - 475 What policy could the Federal Reserve implement to eliminate the output gap? Increase G by 28 Increase the reserve deposit ratio Increase T by 188 Buy Bonds

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: The Federal Reserve conducts a $10,000,000 open market purchase of government bonds. The reserve…

A: Given Reserve Requirement = 5% or 0.05 Increase in deposits = $10,000,000 Money Multiplier=1Reserve…

Q: Given a reserve requirement ratio of 10%, what will be the maximum effect on quantity of money in…

A: A bank loans its surplus reserves to earn more interest. A $1 rise in the monetary base causes the…

Q: Suppose that the T-account for First National Bank is as follows: Assets Liabilities…

A: The required reserve ratio of a bank depicts the minimum amount of deposits a bank must keep as…

Q: Assume that the Fed's reserve requirement is 20%. If you deposit a $100 bill into your checking…

A: The money multiplier is a concept used in monetary economics to describe the relationship between…

Q: Assume that the required reserve ratio is 15%. If the Federal Reserve buys a $10,000 government bond…

A: The Federal Reserve can affect money supply in the economy through open market operations. This…

Q: If a bank had $200 million in demand deposits and faced a 40 percent reserve requirement, it would…

A: Total demand deposit = $200 Reserve requirment = 40% We have to calculate the value of required…

Q: Assume the following: i. The public holds no currency. ii. The ratio of reserves to deposits (0) is…

A: The required reserve ratio of a bank depicts the minimum amount of deposits a bank must keep as…

Q: The initial condition of the banking system is as follows: $150 billion in reserve, $1,350 billion…

A: The banking system holds: Reserves of $150 billion Loans & Investments of $1350 billion Deposits…

Q: Which one of the following statements describes a shortcoming of the Federal Reserve's monetary…

A: Main function of Federal reserve are Conducting monetary policy – The federal reserve aims to…

Q: Assume that banks are able to lend out 85 cents on every dollar deposited, and a bank receives…

A: Note:- Since we can only answer up to three subparts, we'll answer the first three. Please repost…

Q: please answer in text form and in proper format answer with must explanation , calculation for each…

A: The maximum possible increase in the money supply resulting from your bank deposit can be determined…

Q: Which of the following places an upper bound on the interest rate that banks will pay to borrow…

A: Interest rate: - it is the percentage charge on the principal amount by a lender to a borrower.

Q: Use the supply and demand analysis of the market for reserves to visually illustrate and explain how…

A: The federal funds rate is the cost of borrowing from other depository institutions, whereas the…

Q: Prior to the Great Recession, the Federal Reserve followed a restricted reserves policy. True…

A: The Great Recession: The great recession which started in Dec 2007 and lasted for almost 2 years was…

Q: assume the reserve requirement is five percent. If the Fed sells 10 million worth of government…

A: Open market operation refers to the buying and selling of government securities by the federal…

Q: Use the supply and demand analysis of the market for reserves to visually illustrate and explain how…

A: The trade of reserves by the banking sector is performed in the reserves market. In this market, the…

Q: If legal reserve ratio is 21% Calculate Multiplier

A: According to the above given question, the values given are:- Legal reserve ratio = 21% = 0.21 We…

Q: Given a reserve requirement ratio of 10%, what will be the maximum effect on quantity of money in…

A: The Fed uses the open market purchase and sale of US Treasury bonds to affect interest rates and…

Q: Using the supply and demand analysis of the market for reserves, indicate how the following…

A: Meaning of Demand and Supply: The term demand refers to the willingness of an individual to…

Q: Suppose that rather than immediately lending out all excess reserves, banks begin holding some…

A: The reserve ratio has increased to 20% while the multiplier falls to 5. This would mean that the…

Q: What is the maximum impact on the money supply from the bond liquidation in the previous problem(Use…

A: $40 is reserves

Q: Explain why the Reserve Demand is perfectly elastic at Interest on Reserve Balance (IORB).

A: The demand for reserves in the market is typically a regular downward sloping demand curve due to…

Q: Under what circumstance can the central bank increase the interbank rate by increasing the interest…

A: Inter-bank rate The interbank rate is the interest rate charged by banks on short-term borrowing and…

Q: Assets Liabilities Required Reserves: $360000 Deposits: $1250000 Loans $150000 Capital: 0 Bonds:…

A: Required Reserve Ratio refers to the percentage of demand deposits (checking account balances) that…

Q: money supply will immediately:

A: Option (1) is correct. Immediate increase in money supply = amount of bonds purchased Overall…

Q: What kind of Monetary Policy could the Federal Reserve Board use to fix an economic situation where:…

A: Monetary policy: Monetary policy is an instrument to manipulate the growth rate of an economy's GDP…

Q: From 2020 to 2021, the Bank of Canada started the Corporate Bond Purchase Program, an attempt to…

A: The entire amount of money owned by the public at a given period in time in an economy is referred…

Q: Assume economic growth is weak, reserves are abundant, and the inflation rate has been below the…

A: Monetary policy refers to the set of actions and measures taken by a country's central bank or…

Q: In an economy, the demand for deposits is 150,000 goods and the non-borrowed part of the monetary…

A: Reserve requirement refers to the minimum of total demand deposits a bank has to keep within itself.…

Q: Following the Great Recession, the Federal Reserve adopted a restrictive reserve policy. true…

A: Following the Great Recession, the Federal Reserve adopted a restrictive reserve policy. This…

Q: The Federal Reserve Board influences the national economy by adjusting interest rates. 1) True 2)

A: The Federal Reserve Board, often referred to as the Fed, is the central banking system of the United…

Q: Assume that banks lend out all their excess reserves and individuals deposit all their money. If the…

A: Given Required Reserve Ratio is 0.14 Fed SELLS $10 billion worth of bonds through an Open Market…

Question

C = 195 + 0.15(Y - T)
\=215
G= 80
Ot = XN
T= 120
Y* = 475
What policy could the Federal Reserve implement to eliminate the output gap?
Increase G by 28
Increase the reserve deposit ratio
Increase T by 188
Buy Bonds

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Explain why the Reserve Supply is perfectly elastic at Discount Window Rate.
If the Federal Reserve purchases $100 million worth of government securities in open market operations, what is the maximum amount of change in the money supply if the reserve requirement is 8% and banks hold no excess reserves? Group of answer choices Decrease by $1.25 billion Increase by $1.25 billion Decrease by $1.15 billion Increase by $1.15 billion
Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 8.04% and ϕ = 4.15%. b. Charges a 0.26 percent loan origination fee to the borrower. c. Imposes a 14 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 9 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan. Note: Convert your answer to percentage format. Enter your answer rounded to 2 decimals, and without any units. So, for example, if your answer is 3.4568%, then just enter 3.46.
If the central bank sells $500 in bonds to a bank that has issued $10000 in loans and is exactly meeting the reserve requirement of 10%, what will happen to the amount of loans and to the money supply in general?
What specific actions could the Federal Reserve take to decrease the money supply and therefore raise interest rates to enact Contractionary Monetary Policy?
If the Federal Reserve buys bonds from commercial banks, what will happen to the level of excess reserves in the commercial banks(based only on this transaction)? Explain.
What are the terms in this question ? A liquidity trap is a situation where a portion of the moneydemand curve becomes horizontal; people are willing to hold unlimited amounts of money at some low interest rate.
Assume that banks are able to lend out 85 cents on every dollar deposited, and a bank receives $9,000 in deposits. If the reserve requirement is altered to 10%, what will this do to the money supply? What does this do to equilibrium interest rate in the market for loanable funds? (Show on a graph.) What is another way the Federal Reserve will achieve the same outcome in Part 1?
Suppose the Fed buys $2000000 in government securities from someone who is a depositor at the First National Bank of El Reno. Lets assume the person deposits this money in this bank. Further assume that the current reserve requirement ratio is 20%. Please indicate below what will initially happen to this bank's balance sheet as a result of this transaction. Change in Reserves Change in loans Change in deposits Please indicate what will eventually happen to the nation's banking system as a result of this transaction. Change in reserves Change in loans Change in Deposits
What is a likely direct result in bank behavior after the Fed lowers required reserve rate? No answer text provided. Issue more loans Raise interest rates Sell off government bonds
Commercial banks that go to the discount rate window to borroe funds from the Federal Reserve, may not be able to borrow funds from other bank based on the Fed Funds rate a. needs to pay a penalty rate to borrow from the Federal Reserve b. c. may need that their internal balances and accounts be serutinized by the Federal Reserve All of the above d.